We previously established that membrane-type metalloproteinases (MT-MMPs) are essential for skeletal development in the mouse, where collagenolytic activity is critically dependent on MT1-MMP. Importantly, the traits associated with loss of MT1-MMP in the mouse are a remarkably identical to those of the human vanishing bone disease, Winchester syndrome (OMIM # 259600), which now is identified as a homozygous mutation of the MT1-MMP locus. Due to the wide-spread expression pattern of MT1-MMP in non-skeletal tissues, and in the skeleton and associated tissues, we have generated and utilized a conditional deletion mutation mouse strain (MT1-MMP f/f). We subsequently deleted MT1-MMP activity in a progressive cell-maturity and developmental stage-specific fashion to assign the cell- and tissue-specific functions of pericellular proteolysis mediated by MT1-MMP. Additionally we have addressed the role of MT1-MMP activity in the bone marrow-derived monocyte/macrophage/osteoclast compartment, where the significance of MT1-MMP expression is poorly understood. To establish the role of MT1-MMP activity in pericyte-like cells (some of which have been proven to be SSCs), we have ablated MT1-MMP activity in SM22alpha positive cells (MT1-MMP f/f;SM22alpha-Cre). Loss of MT1-MMP in this subset of cells is reminiscent of universal MT1-MMP ablation including dwarfism, rampant bone resorption, diminished bone formation, progressive wasting, fibrosis and early demise. These studies demonstrate that cells forming the skeleton are recruited out of the perivascular cell pool and utilize MT1-MMP to exert their function. Using a SM22alpha-driven beta-galactosidase reporter, we have demonstrated that SM22alpha-positive cells expessing either VCAM-1 or PDGFRbeta isolated by cells cell sorting before development of the skeleton can be expanded ex vivo and give rise to bone upon in vivo transplantation. In contrast, cells with similar marker profiles in the absence of MT1-MMP fail to support bone formation, thus underscoring the importance of proteolysis in the skeletal stem/progenitor population. We have subsequently contrasted the role of pericellular proteolysis in SM22alpha-positive progenitors with the function of MT1-MMP in Osteocalcin (Ocn)-expressing, mature osteoblasts (MT1-MMP f/f;Ocn-Cre). Unlike SM22-specific deletion, Ocn-mediated ablation of MT1-MMP leads to grossly normal mice, which however display diminished bone mass and spontaneous fractures in adulthood. Thus, while progenitor-specific deletion results in dysmorphism and resorption, osteoblast-specific ablation mainly affects bone apposition, but not resorption. Additionally, Ocn-mediated ablation of MT1-MMP causes a prominent increase in marrow adipocyte expansion the default terminal differentiation state of SSCs. We hypothesized that MT1-MMP-mediated proteolysis in mature osteoblasts controls the fate of uncommitted progenitors by juxtacrine or paracrine regulation of adipogenic fate. Analysis of marrow-ablated bone from mice with Ocn-specific MT1-MMP deletion demonstrates a dramatic increase in the 56kDa delta-like (drosophila homolog), DLK1 levels. We have demonstrated that DLK1 is a novel substrate of MT1-MMP; i.e., membrane-bound DLK1 is efficiently cleaved by MT1-MMP to a soluble ligand presumably required for suppression of adipogenesis. The true function of DLK1 leading to this suppression is, however, poorly understood. The partial homology of DLK1 to canonical Notch ligands of the delta-like and Jagged family has earned DLK1 the presumptive role of a non-canonical Notch ligand. We have demonstrated that soluble, but not immobilized DLK1 efficiently attenuates Dll4-mediated Notch signaling, and as such suggests that DLK1 is a competitive inhibitor in canonical Notch signaling. Consistent with this hypothesis, the Notch responsive genes, Hes1 and Hey1, are also elevated in the absence of MT1-MMP pointing to disruption of Notch signaling regulation in the absence of protease-mediated DLK1 shedding. These results demonstrate the important (and previously unrecognized0 role of the mature bone cell as a regulator of progenitor fate via protease-mediated DLK1 shedding. In the context of skeletal homeostasis and bone turnover, one of the essential cell types is the osteoclast, which expresses abundant levels of MT1-MMP. However, the role that MT1-MMP plays in osteoclastic activity is not well understood. For that reason, we utilized LysM-Cre mice to specifically ablate MT1-MMP in osteoclasts (MT1-MMP f/f;LysM-Cre), and unlike other cell specific-deletions, this led to increased trabecular bone content. Consequently, osteoclast-specific MT1-MMP deficiency is not the cause of the dramatic bone erosion observed in MT1-MMP deficient mice. MT1-MMP-deficient osteoclasts form in equivalent numbers, display a morphology indistinguishable from wild-type osteoclasts and retain an uncompromised ability to degrade mineralized matrix. They do, however, display a near complete defect in ability to degrade fibrillar collagen, the major component of bone-lining periostea. This connective tissue is a barrier between the osteoclast and the mineralized bone that must be degraded prior to mineral dissolution. These results highlight the function of neutral proteinase activity in osteoclasts and explain the increase in bone content following loss of MT1-MMP in this cell subset. With our collaborators, we have been generating various mouse models for the study of fibrous dysplasia of bone (FD). FD is a crippling skeletal disease characterized by replacement of normal bone and marrow with hypomineralized, unorganized bone and a fibrotic marrow, devoid of hematopoiesis, leading to deformity and fracture of the affected bones. The disease is caused by post-zygotic mutations (R201C, R201H) of the gene encoding the alpha subunit of the stimulatory G protein, Gs. Lack of inheritance of the disease in humans is thought to reflect embryonic lethality of germline-transmitted activating Gs-alpha mutations, which would only survive through somatic mosaicism. Multiple lines of mice that express Gs&#945;R201C constitutively were generated and were found to develop an inherited, exact replica of human FD. Robust transgene expression in all tissues and murine embryonic stem cells was associated with normal development of skeletal tissues and differentiation of skeletal cells. As in the human diseases, FD lesions in mice developed only in postnatal life. One remaining question not addressed by the model disease induced by ubiquitous expression of the R201C mutation is which cell subset drives the disease process. To resolve this issue, R201C was expressed in mice under the control of the osteoblast specific Col1&#945;1 2.3kb promoter. This forced expression of the mutated allele, however does not replicate the fibrous dysplasia phenotype, but rather induces a high bone mass phenotype with osteopetrotic bone. These data demonstrate that fibrous dysplasia, contrary to common perception, is not a disease of the osteoblast, but originates in upstream skeletal progenitors of osteoblasts, presumably in the bone marrow stroma.